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The officialT-Advisor BLOG

Conservative Vs. Aggressive Portfolios

The decision to invest a certain amount of money in a specific investment portfolio is a difficult task which implies a thorough analysis and careful study of said portfolio’s qualities and needs. However, the decision to move forward does not complete this choice. Once one has decided where to invest, one must also know what type of investment will be made according to each investor’s own criteria.
In the following content, we will define and classify portfolios based on the differences and specific traits of types of investors according to the risk factor involved in making investment decisions.
1. Conservative Portfolios
This method of investment based on management via a conservative portfolio is common in those investors who are defined by their refusal towards facing elevated risks. These types of portfolio value all of the actions and decisions, ensuring they are secure and minimizing the risk that each individual has to take with each investment.
Conservative investors prefer investments which guarantee a positive and fixed monthly or annual performance or at least ensuring some minimum return. These individuals create their portfolios around this mindset. At the same time, the usually select fixed-term deposits using safe currency, for example, the dollar or the euro. The greater part of investments of conservatives are divided in the following manner: 20% stocks, 80% bonds, assuring the largest operations at the lowest risk.
In conclusion, what a conservative portfolio holder seeks is to reach an investment maintenance which will provide a reasonable, guaranteed and stable return. These people are comfortable with the high level of security that comes with this type of portfolio and it will always be the safest option, despite the probability that it is also the less lucrative one.
2. Aggressive Portfolios
The aggressive portfolio is a method of investment management which tend to gain popularity among those people who stand out for their passion for chasing risks and who are constantly searching for ways to achieve the greatest possible return from each and every one of the operations that take place. By doing so, they assume a greatly elevated risk while investing in portfolios for which they hold little information or which find themselves in emerging markets, implying a high-risk factor.
Aggressive investments are based 100% on actions, meaning operations are a direct consequence of economic and stock fluctuations and their clients. As is to expect, with great risk comes a much greater possibility to achieve success, along with the opportunity to reap large benefits, both of with drive the motivation of aggressive investors.
Which is the best option?
The truth is that, no matter whether or not investors consider themselves conservatives, avoiding risks at any cost, having fixed investments with little or no risk won’t allow them to benefit from positive changes within the market. This will always lead to facing the risk of never having had the chance to read more.
The ideal investor is the person who can invest their capital with a minimum risk but designating the greater part of their investment in risky operations in emerging countries or markets on which the investor has little information available. The end-game for this investor is being able to draw in greater benefits as a direct result of interests and assumed the risk.
The correct decision will remain 100% subjective depending on each person, profile and moment. Evaluating your personality and your ability to confront the stress that comes hand in hand with risk along with your personal goals as an investor can be the elements which determine which choice is most valid when defining your portfolio.